In the fee-based model, the needs of the following must be met: (1) the company, (2) the users.
In the ads-based model, the needs of the following must be met: (1) the company, (2) the advertisers, (3) the users.
By removing the advertisers from the equation, a lot of resources are freed up to address the needs of the other two parties. It's kind of strange to say that "the company" is a party being serviced in this manner... they're asking for cash, and people are giving it to them for a service. Yes, they have needs that require resources (think administrative assistants, HR, sales, etc), but these people all exist to help service the user. To that extent, the majority of the company is now existing to create a better experience for the user. Their argument is that this is significantly superior to the model where a significant portion of the company exists to service advertisers, and not benefit the end user.
You're assuming that advertisers never meet users needs.
If I'm selling you a bike, and I also tell you about a good deal on bike insurance you can get, then I'm advertising at you. Maybe I get a cut of the insurance premium. BUT, I'm also adding value for the customer. It's a mutually beneficial transaction.
I know it's blasphemy to claim that advertising is sometimes pretty damn useful around these parts, but the fact is, it is useful for users just as much as it's useful for companies in search of revenue.
edit: Has no one here ever clicked on a sponsored result in google? If not, bear in mind you're the exception rather than the rule.
I disagree with you - but I'm not downvoting you because I think you bring up an interesting point. The problem, though, is the advertising on buy.com, monoprice.com, amazon.com and even google.com is actually quite useful for me. Sometimes even the ads on dpreview.com are interesting. The issue here is intent - on these sites, I am looking to buy products, product reviews, or (in the case of google) searching for something that might be product related.
On my social networks (Path) - my intent is to see what my niece is up to, what my friends are doing, and what my mother's latest project is.
It is not (and never has been) to "Find a Female Friend in Redwood City", or, "Check out the Kmart Special".
It is this disconnect between intent and ad-presentation that makes the pollution of the twitter feed so offensive.
Advertising can add value when it transmits novel information that would be hard to get some other way. But it usually doesn't.
It's mainly an arms race to distort natural market outcomes. Coca Cola doesn't spend over a billion dollars a year advertising because they want to make you aware of some new fact. They just think they can make much more than that billion back by manipulating you.
As far as I know, it's just another business expense, which means you deduct it from your profits. Coca Cola paid about 17% in taxes for 2010 [1], so if you squint hard enough I guess you could look at it as a 17% subsidy. But since that's true of any reasonable business expenditure, I don't see it as a significantly distorting incentive.
Advertising is there to make sure you're aware of something. It's telling you "Hey! There's this product/movie/service etc that you might not have known about".
I find advertising extremely useful to know about new things.
Are you seriously suggesting that Coca Cola spends a billion dollars a year to reach people who are unfamiliar with their beverage?
I'm not sure what conspiracy you think I'm suggesting. There is nothing particularly hidden about what advertisers do. Go talk to people who have made ads for a living. Or take a media literacy course. Heck, go watch the Superbowl beer commercials and tell us what novel product information is being conveyed there: http://dailycaller.com/2011/01/27/top-10-super-bowl-beer-com...
The beer commercials are actually quite a bad example in this case: Coca Cola certainly don't spend billions a year to reach people unfamiliar with their beverages. Beer companies do.
A major target market for alcohol is those either underage or just starting drinking. Habits and personally preferences are frequently set very early on - Superbowl beer commercials may be designed for press, but a significant bulk of advertising money is spent by beer companies to convince people who have just started drinking that their brand is the right brand.
They're a great example of the low informational content. The point of the commercials isn't to inform people of the existence of Budweiser. As you say, the purpose is to persuade them to drink it.
This was what advertising was about in the 30s maybe. Since then its gotten sophisticated, employing tricks that prey on our comparatively unsophisticated psychology making you want things that you otherwise wouldn’t.
Besides, if advertising didn’t exist or was illegal or something, couldn’t we just create a webapp to let people exchange information about interesting products and services and that would be the end of that problem. No need for information about products and services to be so pervasively integrated into every nook and cranny of our society.
You don't have to buy everything you see just like you don't have to hit on every pretty girl that you see. We still have the power to say no, regardless of the messages. We could say that pretty girls everywhere leads to impure thoughts right? Advertising is just like a pretty girl -- you are under no obligation to act on your 'unsophisticated psychology.' if you disagree with me, then the terrorists have won.
The obvious difference is that advertising is a whole profit-driven industry consciously designed to manipulate people's thoughts and behavior, whereas pretty girls are just going about their business.
You talk about one's psychology as if it's something separate that you can choose to act upon or not. That's a false split; one's psychology is the mechanism that does the choosing. That is what is getting manipulated for profit.
Change that to "internet advertisers", and that is exactly my assumption. Personally, I think that is a fine assumption to make. I have never seen an advertisement add value to a internet-based conversation I was having or article I was reading on the net.
So when amazon suggests that you might want to buy a certain bike helmet based on the fact you're buying a bike, you find that information utterly useless?
If I'm buying a bike then I either already have a helmet, or already know I need to buy one. So what value is the ad providing?
I'm not going to blindly purchase something without doing at least a little research (to check prices, at the very least), so the ad is just getting in the way and wasting bandwidth.
In that case, congratulations! You are the perfectly-informed consumer, aware of every relevant product category (and product). You use the Internet for price checking only. You don't need to be made aware of a new product in any category, because you are on all industry listservs. You are the only one of your kind.
Every other homo sapiens sapiens finds it difficult to stay abreast of all the submarkets he/she participates in. They spend their mental energies on other things, or simply don't care to research products costing under some threshold.
For example, I consider myself very savvy at computer purchases. However, I really can use guidance in purchasing power tools as I'm not a frequent user. In fact, I really wouldn't be surprised to learn that of the existence of entire categories of power tools. Just because I'm not seeking them out doesn't mean I couldn't use them around the house. Oh, and I don't really want to spend a lot of time researching them because I actually do have better things to do. Also, I freely admit that I have never researched tape; the benefits of one vs. the other are a topic of which I am wholly ignorant at the moment. (Obviously you are not possessed of such an ignorance.)
For the homo sapiens sapiens other than you, sometimes a little nudge is actually mutually beneficial. An ad might make us aware of a product category, or an upgrade to an existing category that makes it more useful to us. All of these might make us do more research, or simply go buy something.
So how do you find out about anything? Even in the Bike shop, they have product displays to show off products-- that is advertising. The funny thing is you are likely subconsciously exposed to products that you eventually buy all while thinking that you 'discovered' the product on some hipster blog while pretending that you're impervious. You wouldn't know about any new movie unless they were advertised. Unless you read reviews which, are seeded by the film's PR department which is, in effect advertising. Don't be so sanctimonious. You cannot honestly say you never tried a new restaurant unless expressly recommended by a friend. Those signs in front of restaurants.. You guessed it, advertising. You're a consumer whether you admit it or not.
The one area where I see advertisements providing value to those viewing them is in search and search-like contexts. In user testing, one of my colleagues was having a guy go Google searches for particular products. The guy said, "I'll tell you a secret. I ignore the stuff on the left. The really good stuff is in blue on the right."
But everywhere else, the purpose of the ads is to distract you from whatever you're trying to do. Which is a real struggle for Facebook; gossip is so much more interesting then your average ad that their click-through rates are terrible.
I agree, but advertising utility varies from site to site and in implementation method.
For example, I click quite frequently on Google Ads in my search results, because the ads are related to my activity.
On the other hand, I never click on Facebook ads, because a) they look ghetto/sleazy, b) they never provide any useful content related to my interests.
There's a ton of bad advertising. That doesn't mean it's all bad.
I agree. I've never clicked on a facebook ad either. They seem scammy to me. Advertising on social media is far harder than on a site where you have some indication of intent.
Yes. Eliminating conflicts of interest works wonders for an organization. And not just in the obvious ways: "It is difficult to get a man to understand something when his salary depends upon his not understanding it!" -- Upton Sinclair
I think the article is alluding to the fact that charging users gives a business an incentive to milk those users.
It's similar to the debate about customer support as an avenue for sales or as an expense. The business's incentive is to provide the worst customer support it can without making users drop the service.
Another example would be video games and DLC. Companies can wall off features that should be "in the game" and force their customers to pay extra for it.
I don't necessarily buy his argument, but it's not entirely black and white.
I'm a bit surprised the comments here are so overwhelmingly critical. I think there's a legitimate point here, which is that the users paying money is not a silver bullet. It's not as if paid services don't make decisions that end up screwing users one way or another, not to mention the fact that subscription fees and ads are not always mutually exclusive (witness cable TV, newspapers, etc). In fact Twitter toed the line for years, building developer confidence and providing a solid platform. This is precisely the problem that App.net is addressing: Twitter appeared to be trustworthy but when push came to shove they decided to throw the developers under the bus because they had enough normals that they figured the developers and early adopters weren't necessary anymore.
The reason App.net is more trustworthy is because its founding principles are a direct response to this existential threat of advertising dollars subverting the platform. The paying users part is merely the explanation of how to make this company work, not the guarantee that they will do no wrong.
My only potential gripe with App.net is that they can't protect their users after the company is acquired. The Instagram/Sparrow problem combined with tendancy of almost every company to kowtow to the advertising industry is a valid concern for me.
They should follow an IRC or Jabber model. Anyone can host an IRC/jabber server. Maybe App.net can make an industrial twitter server to be hosted on windows, *nix, etc.
But of course, that's not what App.net is going after. That is what I think would be a lot better. Or maybe an industrial Facebook-ish server, too. Would be helpful to run in-house in giant organizations, I bet.
Point 1 is complete hogwash. Users don't want to keep their money. Money is worthless if you don't spend it. Users want to get equivalent or better value for their money. If App.net wants the user's $50, the user wants to get at least $50 worth of value from App.net. So yes, their economic incentives are definitely aligned. If App.net wants to get more than $50 from their users in the future, then they damn well need to provide more than $50 worth of value to their users.
And Point 2 is pretty bad as well. Yes, you can't degrade the service so badly that users leave. But you can still degrade the service to a certain extent. Since the users aren't paying anything for it, they don't expect much more than $0 worth of value from the service. So you can end up with a pretty bad user experience in the name of satisfying your advertisers.
Fee-based Twitter vs. Ad-Supported Twitter is a false dichotomy. This smells like a PR stunt.
How about an open-source Twitter-like service that can run on your own server and federate with others? http://www.Status.net has offered this for several years now and they have done an outstanding job of creating a free and open alternative for status-feed based communication.
Twitter's functionality is basically email+listserv. I've often wondered why the big email players (Google in particular) didn't field a competing service simply built on top of email. You could still use your email account as usual, but using a special client you could use the same account as a Twitter clone.
The key to a company providing good service is competition.
Look at Comcast, one of the most hated consumer companies, it charges for service but its interests are not aligned with its customers because it operates regional monopolies so their interest is in extracting as much money for as little service as possible from the locked-in users.
Compare with Apple, it operates in the highly competitive consumer electronics industry and that helps make it a world leader in customer satisfaction.
Now look at American mobile phone service operators. There exists a decently competitive market with 4 main companies, but the standard 2-year contract lock-in means all the competition happens mostly at customer acquisition where you see big deals on discount phones. But after the customer is locked-in they operate more like monopolies with hidden charges and poor service.
As for social networks, the network-effect lock-in is a huge impediment to good market competition. Once someone has their social network in place it makes it very difficult to switch. So I would think the incentives are more similar to the mobile phone market, pro-consumer at acquisition and then not so much afterwards.
This is such muddled thinking there isn't much there there. You can't just drop a word like "ideological" into a debate as if there is one uniform definition. As near as I can tell, the only way to be ideologically pure for Mike Masnick would be for no money at all to be involved, but once you spell that out, it becomes obvious that this is hardly an uncontroversial definition on its own. It also means that "ideologically pure" is pretty much impossible by definition at any scale. I for one tend not to worry too much about the fact that someone has not reached a standard that was impossible to reach in the first place.
If I am wrong about what it would take to be ideologically pure according to Mike Masnick, well, chalk it up to the fact he never saw fit to spell it out.
I could pick further, but it's so mushy there's hardly any point.
But doesn't that get rid of the social aspect of "Social Media"? People like being able to comment on things - but why should they have to pay to do so? Just because someone isn't willing to pay doesn't mean that what they've got to say isn't worthwhile, and vice versa. I think a pay-to-post/free to consume setup would result in a spammy, advert ridden service, that would quickly die.
Agreed. What I see most people using Twitter for is effectively advertising anyway, so let those people pay to keep the service running since they're clearly getting marketing value from it.
The element that techdirt overlooks, and that I think they did their community (and themselves) a disservice by not mentioning, is the privacy element.
Because selling your personal details is a (relatively) invisible intrusion (unless the provider really screws up, ala Beacon) - there is a significant cost to the user (that cares about privacy) that is not visible to them. App.net is aligned only with the users from that position. There is _no_ incentive for them to resell their user's private information.
With regards to advertising - clearly that has to do with your pain points regarding advertising. We've heard lots of feedback from people who say they don't mind the advertising on Facebook, or twitter. These people also might even watch commercial television.
For those of us who stopped watching commercial television a decade ago (before "cutting the cable" was in vogue), who run ad-block religously, and are offended by "kmart specials" appearing in our twitter stream - we clearly have already reached our pain point, and are looking for something new.
For those people - App.net will be a consistent, long term, ad free, communications infrastructure.
There may only be 10,000 or so people there, and the other 5million (50 million? 500 million?) people may be on twitter. But, unlike Facebook, where it's important that all of your high-school friends, ex-girlfriends, aunts, nieces, classmates, and party-goer-chums are on the same site - I'm quite happy to leave them all behind and follow a small core of interesting technical people without distraction.
So I was thinking about this recently: do companies actually "sell" your personal details to advertisers?
A practical example: let's say I run a cooking website, where users log in and share recipes, vote and comment on them etc.
I (the site owner) store your votes, and comments, as well as track what recipes you view.
From this I (still the site owner) can learn things about you. If you're always viewing lots of chicken recipes, I an make the assumption you're a fan of chicken. I can also note that the recipes that you view and like are "upper class", requiring expensive ingredients.
Now an advertiser for a large Chicken producer could come to me, and want to advertise its new Free Range chickens. They (the advertiser) asks me to display an ad for all people who like chickens and like expensive tastes. So I (the site owner) do this, and you (a user) see the ad.
At no point has the advertiser learnt anything about my users, or had any direct knowledge of my users and their preferences. It's a completely one-way transaction.
So if I was writing a recipe website and I wanted to fund it with advertising, that's how I'd do it. I'd probably give some kind of iTunes dynamic playlist / email filter style UI where you get to pick the types of people your ad gets seen by, but at no point would the advertiser actually learn anything about those people.
Is this still considered "selling your personal details"? Or are companies like Facebook and (presumably) Twitter actually essentially handing over their DBs?
When people say that Facebook "sells your data," they're (charitably) engaging in hyperbole to strengthen their rhetorical point, or (less charitably) lying. Facebook shows ads to the users they're targeted to, without sharing the users' details or identities with advertisers.
Have app.net people clarified if they would be okay if the service only had 10,000 users at its stabilization point?
I know you'd be okay with it but so far, we don't have much from them stating the same. The default of course is that a service that peeks at 10,000 users is headed to dead pool. This is a bit different with 10K paid users but that is still not much in terms of providing financial security to the company to not require funding or other creative ways to monetize.
So my question is simple to app.net folks: if two years from now your service has 10,000 paid subscribers AND you know that that is the peak, will you be content running the company?
I'm actually okay with twitter only having 12 users (plus me) - just as long as they are the correct 12 users. So far, 5 of the 12 have committed to using App.net.
I'm a relic though - I make a lot of use of skype-chat/AIM/SMS/iMessaging for my DMing - very little goes through @messages on twitter. For those who do all their messaging on twitter, broad uptake might be more important.
I'm hoping that App.Net establishes an equilibrium somewhat similar to to http://en.wikipedia.org/wiki/The_WELL - in which a dedicated paying community of 5,000 to 10,000 is more than enough for viability - particularly as I think this 5-10K users will be among the most interesting on the internet, and will almost certainly avoid the "September Problem."
Regardless - it's something new, with a working Alpha, with an API, and an interesting group of people, lead by someone with a track record of Getting Things Done. The next year, at the very least will be interesting.
I'd they are just in it for the ideology, then I fully expect then to run the company as a non profit. Oh, they aren't are they? They want to make money too? And they're trying to convince people that they're in it for openness and all that? If they made App.net into a Wikipedia style foundation, I would have gladly jumped on board. But instead they're just trying to create an angle to justify a twitter clone. I can build my own twitter clone. I don't need to pay App.net for that. I have yet to see anything original about this idea. They're just trying to profit on a rather limited crowd of tech people. If it was such a great idea, then the VCs would be throwing money at them. And no, they didn't turn it down-- it isn't there because their business model won't scale. There's only a limited amount of social network inbreeding that can happen before a niche paid network runs out of cousins.
"There is _no_ incentive for them to resell their user's private information."
The incentive is whatever someone else would pay for it. That may not be worth much currently compared to getting to claim to be above all that, but is your information permanently safe there? Do you trust that App.net will always be managed by the same people in the same way? I haven't seen this addressed much by proponents of the "be the customer, not the product" mantra. It would be very easy for someone to be both a customer and a product.
"A free-based service, supported by advertisers, has tons of incentive to keep its users just as happy as a fee-based service. Why? Because if it doesn't, people go elsewhere and the advertisers go with them."
For the average consumer internet site, happy users does not equate to happy advertisers. As Facebook shows, you can have "happy" users -- in that they don't leave -- but create a dismal product for advertisers. They cannot optimize for advertisers without compromising the user experience. App.net will never need to optimize for advertisers, so they can focus completely on the user experience, or platform experience.
Edit: Removed quote from code block. PG - Markdown parser?
Yes, the goal of a UX designer in an advertising-supported context is to create a tolerable experience for the user while delivering maximum exposure for the advertiser, whereas a UX designer for a fee-based service is focused on delivering a great experience for the user, period.
I dislike ads so much I would stop using your service if it wasn't possible to block them. I would much rather pay for all the ad-supported (well, not by me) service I use.
Everybody should be looking for ad-free ways to support their services.
If you are not paying for something the provider has incentive to sell your data, not so much if you paid for it. Example: I'm currently on a free Dropbox account simply because I don't need much storage. I would love to pay for the option to have my files encrypted. This would mean that Dropbox can't save space, thus it's alright I should pay for that.
"First off, App.net's interests are not economically aligned with its users. It wants money from those users, and all things being equal, those users want to keep their money. So their goals are actually diametrically opposed."
After I read that, I didn't need to read anymore.. I, and I presume many others, are perfectly alright with the idea of giving money to a company that is providing a worthy product or service in return. I understand that it costs money to make a good product or to provide quality services of any kind.
Yes. He's essentially affirming the conclusion that users only want free services.
Of course more users want free services, but that doesn't mean that some users don't want a premium service, and more importantly, that those users don't add a disproportionate amount of the network effect value to a microblogging service.
I don't know why this is so hard or requires such significant investment up front. How is making a decentralized Twitter service more of a challenge than, say, IRC or Jabber? I know that the problems aren't exactly the same, but I would hazard to guess that they are on the same order of magnitude in terms of implementation difficulty.
So they have a runway before their maximum 10K paying users is only enough to keep a part-time operations team and servers up.</sarcasm>
I have to agree with you though. This may be more than <insert weekend project> we always hear about, but not _much_ more. I'd imagined the product would be mostly built already.
Maybe they wanted an injection of cash before getting a handful of servers, and we should see everything up and running within the week.
Maybe they think they need to be Twitter-sized day one, which would be a mistake on their judgement.
That was my biggest concern -- it would seem that if you're building a pay-supported social network, your scaling issues will be business-side long before they are server-side.
^ And that is hardly the only project, and it could use improvements like everything, but it's one that surprised me when I first heard of it, because it really does a lot and, well, nobody ever mentions it..!
Why don't people who donated to app.net at least get an account to use the service? They paid $50 and they don't even get an account? In a way, by paying $50 or more, they are committing themselves to pay an unknown, perhaps greater amount to actually use app.net.
$50 is a lot of money. Why don't funders get an account?
> Why don't people who donated to app.net at least get an account to use the service?
What do you mean? I paid the $50 and now I have an account.
There was an email a week or so ago talking about the launch of Alpha which said to let them know if you want to log in. I replied saying I backed them and would like to log in, and they set me up.
Maybe that was a one-off thing? In any case, it's pretty slick and I'm happy to be on it.
(1) No. In fact, this does make the user the customer, as opposed to free models that make the user the product. If the user is the customer it does impose somewhat of a guarantee that product development will be oriented around the user.
(2) Also no. Everyone by now knows that the value of a network increases very rapidly as a function of its users. Or, put another way, switching costs go way up. Knowing this, it doesn't take a PhD in Game Theory to realize that one potential strategy for a network like Twitter to stay free and attempt to achieve "lock in" (very high switching costs), and then impose tangential costs on the user (shitty advertising) that are less than the switching costs.
This is a nonsensical article. Ideology doesn't enter into it; say rather, a firm that sells directly to the user is open to market pressure from those users in a way that a firm that sells their users to a third party simply isn't.
Agreed. Instilling a price tag for users legitimizes its utility (to a certain degree).
However, what bothers me most about this article is that it's so black-and-white, alluding to the existence of only two pricing models out there: Ads or money up-front. No where does this article mention the possibility for a VRM-based (http://cyber.law.harvard.edu/projectvrm/Main_Page) revenue model, attribution-licensing model, etc.
Think of it like FM radio. It's free for us to listen but we have to sit through advertisements. XM and sirius said hey, let's have people pay to listen, so don't have to make them sit through ads. Basically just a different biz model. That model can work though because you don't necessarily need critical mass to have people consume your content. (Yes to a certain extent you do) But the critical mass needed for the next twitter like platform would require a huge critical mass for people to continue to pay for the service. Just my stupid opinion
But they're also SATELLITE radio. That is a huge value add over traditional radio service. I don't think users were only paying for sirius/XM because the services didn't have ads. It was because the products were technically superior.
What is the huge value added over traditional radio? That it's not FM? In terms of quality you mean? I thought when it first came out that their big pitch was no ads. But don't get me wrong, I also think satellite radio is better because of programming, sound quality, AND no ads.
Although I think they are running ads in some markets... Guess they couldn't survive on the no ads model and are going hybrid?
"It wants money from those users, and all things being equal, those users want to keep their money. So their goals are actually diametrically opposed."
By this standard, aren't the goals of every party in a transaction where money changes hands "diametrically opposed?"
Apparently the author finds the notion of a fair-value exchange impossible to understand.
"First off, App.net's interests are not economically aligned with its users. It wants money from those users, and all things being equal, those users want to keep their money. So their goals are actually diametrically opposed."
I would bother with an introduction to the fundamentals of how economic exchange work.. but I honestly believe this was written with so much foaming froth on the lips of the author that he cannot possibly see sense enough to understand reason.
I hope he got the jacked up page view count he was hoping for.
Well, no. Those users want a service. Nobody coerces anyone into giving App.Net money, so those paying users actually don't want to keep this amount of money, in exchange for the service.
> A free-based service, supported by advertisers, has tons of incentive to keep its users just as happy as a fee-based service.
But for that it has to show ads, and the business is then to show ads in the most efficient way possible, which has a number of consequences we can readily witness today.
It's all about profit. That is, when the transactions are all said and done (whether the user paid for the service, or the advertisers have bought their advertisements) how much good will is left over?
How much good feeling does each party how? Can the user say that they feel good about using the service, is the service provider satisfied with how the transactions lay?
With Facebook and twitter some people, users and advertisers alike, don't feel enough profit from the service. Maybe with App.net they will.
They miss the point when they write "Who's to say that App.net will always cost $50 per year? What if, a year from now, it needs a lot more to keep the service going. App.net has incentives to figure out ways to raise the price to bring in more money."
If it turns out that the price charged is insufficient to maintain the service, I'd expect them to raise the price. The alternative is for the service to not exist, taking as an axiom an ad-free service.
Money talks. Don't bite the hand that feeds ya. If users pay and there are no advertisers, the users are investors. If advertisers pay (or pay a heck of a lot more than the user) they're the investors.
Look at HBO, because they're not beholden to some lowest common denominator PC/right-wing/hypocrite relifreak agenda they produce awesome content. It's not a coincidence.
I think if anything the best thing about having a paid system is that you have one less person to make happy. Unless your ads are just a dropin (e.g. google ads) you have to have a marketing and sales team, and presumably a bunch of coding work has to go into making a backend for advertisers to upload their ads and decide who sees what and so on.
Oh, but there's several shades of grey. Take running friendica or diaspora on your own webspace, for example. You're a customer to your webhost, but the software is free. Well, it does have the cost of being kinda slow or hard to set up respectively, but still.. there are public pods you can use and donate to, and where the product is mostly the warm fuzzy feeling people get from doing the right thing. I think you are underestimating human generosity and inventiveness.. shop around!
My definition of a customer is someone who pays me.
Someone using a free service is a user, they may not necessarily pay.
Didn't mean to come across as underestimating human generosity, I very much believe in keeping kindness, goodness and giving fashionable, but in money, the context of a business, is largely it's bloodflow.
In the fee-based model, the needs of the following must be met: (1) the company, (2) the users.
In the ads-based model, the needs of the following must be met: (1) the company, (2) the advertisers, (3) the users.
By removing the advertisers from the equation, a lot of resources are freed up to address the needs of the other two parties. It's kind of strange to say that "the company" is a party being serviced in this manner... they're asking for cash, and people are giving it to them for a service. Yes, they have needs that require resources (think administrative assistants, HR, sales, etc), but these people all exist to help service the user. To that extent, the majority of the company is now existing to create a better experience for the user. Their argument is that this is significantly superior to the model where a significant portion of the company exists to service advertisers, and not benefit the end user.